‘Push pause’: Spencer asks 1-year tax question as it waits on data

Dome project cost overruns not part of need for cap exemption extension

With at least two major uncertainties in its near-future budget forecast, the Spencer Board of Education at this time is only comfortable asking district taxpayers for a 1-year revenue cap exemption extension. One of those uncertainties is not the cost overrun situation involving the $5 million construction project now less than six months away from expected completion.

As Spencer’s April 6 1-year, $975,000 cap exemption referendum date nears, district officials are dealing with unexpected cost increases associated with the concrete dome construction and related renovation projects that have been ongoing for the past year. Dramatic increases in building material costs are partly to blame, but the Board has a plan in place to handle the overrun. That situation has no bearing on the need for the cap exemption extension, according to Board members and District Administrator Mike Endreas, and no new tax dollars will be needed to cover the unexpected costs.

About a dozen residents attended the Board’s first referendum informational session as part of its March 17 regular meeting. Questions were asked about the decision for a 1-year referendum question, and how the construction project overrun may affect the financial picture.

On the decision to hold a referendum for a 1-year extension now and then to likely call another referendum in April 2022 for a longer-period cap exemption, Board members said it’s a matter of uncertainty. There are at least two significant numbers that are unknown at this time, and Board members said they would not feel confi dent in asking taxpayers now for a 5-year exemption commitment.

One of the numbers is future student enrollment. This year’s student numbers declined by about 80 students, but part of that can be attributed to families choosing to home-school their children to avoid exposure to COVID- 19. How many of those students will return to classes next year is one unknown.

As the Board was deciding what to do about the 5-year cap exemption approved in 2016 that expires after this year, Endreas said the enrollment uncertainty loomed.

“When we did the projections for this year ... I could not tell the Board I know what our enrollment is at this point,” Endreas said. “Enrollment has taken a hit in just about every district due to COVID. That’s one of the huge numbers in the budget forecast.”

The other question mark involves the state budget. Gov. Tony Evers and the state Legislature will approve a new 2-year state spending plan later this year, but the effects of that on revenues for Spencer and other school districts is up in the air. State aids to Spencer could increase, or fall.

“What is our state funding going to look like for any program?” Endreas said.

Board President Tom Schafer said the decision to hold just a 1-year referendum seemed wise.

“We just didn’t have enough information to come forward with a 5-year plan,” Schafer said. “Basically for the next year we want to maintain where we’re at. There’s just too much of a big unknown out there between those two items.”

Endreas said approval of the referendum on April 6 will simply add another year of the $975,000 cap exemption that’s already been in place for five years, and the property tax rate will stay steady or even fall slightly. That would give the Board another year to make a better long-range forecast.

“Push pause -- everything stays the same for a year,” he said. “How about we let all this dust settle? Let’s let all that information come in.” The Board was also questioned last week about the cost overrun situation with the dome construction project. That is a separate concern, Board members and Endreas said, and one that will be covered by a building fund the Board has been filling for five years. In 2019, district voters approved a building project referendum to construct a concrete dome for a gymnasium, fitness center, etc., and to address other building concerns such as expanded space for music programs, remodeling of the family and consumer science classroom, a more secure elementary school entrance, restroom renovations, and other work. The project, with an overall price tag of about $5 million, is being partly covered by a $2.9 million Federal Emergency Management Agency (FEMA) grant as the concrete dome will also serve as a community tornado shelter.

The exterior dome structure is already in place on the

CHEYENNE THOMAS/STAFF PHOTO east side of the school complex, but the cost of work to build out the interior and construct a connecting building between the dome and existing structures is costing more than expected. Endreas said those additional costs are “nothing unmanageable” and do not impact the cap exemption referendum extension. That money is for operations needs such as staff costs, utilities, transportation, etc., and not related to the building project.

Endreas said part of the overrun is attributable to a dramatic hike in lumber and other building material prices. Those costs have risen from 15-20 percent since project estimates were first developed.

“A lot of it was the inflationary hit on the materials,” he said.

Another factor is unforeseen issues construction crews have dealt with as remodeling work continues. Some overruns were experienced on the family and consumer science classroom, and more are emerging as crews prepare to add the new structure onto the existing building.

Endreas said the Board has approved unexpected upgrades to plumbing, gas services, accessibility for those with disabilities and others. Those situations he described as, “We’re here. Let’s do it now. We ran into some of that.”

Schafer said the Board decided such items should be addressed while the project work is underway.

“Most of the cost overruns are stuff we identified as needs over the past few years,” Schafer said. “If we don’t do it now, it’s going to be more (costly) if we deal with it later.”

The unexpected costs will be covered by what the Board refers to as Fund 46, a fund allowed by the state for districts to set aside money for building needs. In past years, if a public school district had money left over at the end of a budget year, it had to find somewhere to spend it or it would lose state aids on the sum the following year. After laws were changed to allow Fund 46, districts could move the excess money there and save it for building needs, yet still receive the state aid on it.

Endreas said Spencer’s Fund 46 now holds about $1.5 million. That will be more than enough to meet the cost overruns.

“The Fund 46 is going to take care of the majority of the overages,” he said. “It won’t drain it. We’ll have a fund balance yet.”

The district was also able to cut some project costs by rebidding contracts. When first bids came in considerably higher than expected, Endreas said the Board worked with project managers to rebid work to get lower prices. Some second bids are not due until this week, so more cost savings could be seen.

Part of the issue with high bid totals, Endreas said, was that contractors were under the misconception that “Cadillac” equipment was required because FEMA funds were being used. Once that was straightened out, contractors submitted bids with less expensive alternatives.

Schafer said the Board has had to make adjustments as this project has developed, but in the end, it will be done on time and will serve its purpose.

“Would we have done a few things different? Maybe,” he said. “But the bottom line is, it hasn’t put us in a budget crunch.”

Endreas said the plan still is to have the new gymnasium and other areas ready for use when classes resume in September.

“The only thing that keeps me awake at night is the turnaround time for materials,” he said.

Residents at the March 17 meeting had several questions on the need for a 1-year cap exemption referendum.

Jannelle Rucker asked what students will gain if taxpayers approve another year at $975,000.

“How are the kids going to benefit from the money?” she said. “And, if you didn’t get the money, how is that going to hurt them?”

Endreas said the Board would be forced to look at spending cuts. Those might be noticed with larger class sizes, or nonreplacement of retiring teachers.

“We want to maintain what we currently have,” Endreas said. “If we vote no, that means there’s a $975,000 hole in the budget.”

Another resident questioned why the Board doesn’t make staff cuts and increase class sizes before going to a referendum.

“Why does it have to fail before you make the hard decisions?” he said. “To me, it doesn’t look like the budget’s been cut anywhere.”

He said the Board has made it a habit to just go to referendum every five years to ask taxpayers for more dollars “until they vote no.”

Endreas said the Board would prefer to reduce the staff slowly, through natural attrition. Multiple teachers are expected to retire over the next few years, he said, and it would be better to not replace some as they leave rather than issue layoffs for sudden reductions.

Also, said Board member Jim Krasselt, it would be risky to cut staff levels now, without knowing how much enrollment might rebound next year. “We have a strong feeling that they will come back so we don’t want to reduce our staff,” Krasselt said. Krasselt also noted that the $975,000 amount the district sought in the last referendum was not that much, as it basically means the district is spending less than a million a year more than it did at the time of its first cap exemption vote in the early 2000s. “That’s pretty realistic if you think about it,” he said. “That’s 18 years ago.” Board member Jordan Buss said it’s important for the district to continue its programs at current levels to stay attractive to families that might consider open enrollment into Spencer. The more students there are, the more state aid comes in, and the less burden there is on local taxpayers. “We do need to compete more with other schools and we have to make ourselves ... more attractive to young families,” Buss said. The excitement being generated by the dome project, in addition to a new housing development in the village where families can build houses, give Spencer momentum to increase enrollment, Buss added. “I think there’s a lot of things that are moving in the right direction,” he said.